Sweet Dreamcast

Published 4:00 am, Thursday, May 13, 1999

LOS ANGELES - Sega of America was expected to announce Thursday that it would launch its new Dreamcast video game system on Sept. 9 at a price of $199.

Backed by a $100 million advertising campaign, the move marks the Redwood City-based company's return to the video game console industry after its most recent offering, the Sega Saturn console, failed to capture a sizable share of the video game market.

The Saturn floundered in competition with Sony's PlayStation and Nintendo's N-64, both of which retail for around $120.

The date will be promoted as 9-9-99, and the marketing campaign will kick off with advertisements on the MTV Music Video Awards that day, said Bernie Stolar, Sega's chief operation officer, in a telephone interview.

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Six years ago, Sega was a seemingly unstoppable force in the interactive entertainment industry. Its Sega Genesis console wrested the No. 1 spot away from the once-dominant Nintendo.

By publishing a vast library of games and backing the system with aggressive marketing, Sega climbed to the top of the video game industry, but there was a long way to fall.

After several failed attempts to build on the Genesis technology base with add-on products like the Sega CD and the 32-X, the company launched its next generation system, the Saturn. It was a 32-bit console video game system jump type: designed to compete with Sony's 1995 entry, the 32-bit PlayStation (bits measure the speed of the game's computer processor).

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The Saturn system was hobbled by a lack of software and an awkward product rollout that left the company months behind Sony. It also suffered from little support and limited availability during the crucial Christmas selling season that year.

Sega began to lose steam and market share to Sony and later to Nintendo, which unveiled a 64-bit game console months later.

A new beginning

A new beginning

"With this launch, we believe we will recapture our market share both from Nintendo and Sony as we move forward over the next four years," said Stolar, who joined Sega in 1995 after working on the successful launch of the PlayStation, currently the No. 1 console. "We'll launch the system with 10 to 12 first-party and third-party titles. By the end of the year, we'll possibly have 20 to 30 titles, both first and third party. Through the year 2000, we'll have well over 100 titles."

First-party titles refer to games designed by Sega itself, while third-party games are written by other companies.

Titles available at launch will include "Sonic Adventure," as well as an array of sports and arcade titles.

"Sonic Adventure" will feature the company's mascot, Sonic the Hedgehog. Sonic the Hedgehog games were at the heart of the company's success with the Genesis console, showcasing the video games' superior graphics and speed.

When Sega launched the Saturn, however, there were no Sonic games available at the rollout, a move widely considered a mistake, especially since Sega's earlier branding and marketing efforts relied heavily on the mascot.

While the system specifications for the 128-bit, CD-ROM-based system have been available for months, Sega also announced that the Dreamcast video game system would include a built-in, high-speed modem.

"We are launching it in the U.S. with a 56K modem, so you can do e-mail and chat," Stolar said. "We are going to build a community for an on-line experience. It will also have multiplayer games that we'll announce later this year."

While consumers will have to wait until September to decide Dreamcast's fate in the market, there is already an indication that third-party developers, the companies that create the lion's share of the games played on consoles, may be ready for Sega's return.

"We would like to see Sega do well," said Brian Fargo, chairman and CEO of Irvine-based software publisher Interplay, "but it will all depend on the titles they release and the installed user base they can deliver."

Developers were cool to the Saturn system, which limited the number of games available.

Sega said it had 60,000 Dreamcast pre-orders in from retailers. It is looking to take many more at the Electronic Entertainment Exposition in Los Angeles from Thursday through Saturday.

Sega will display 40 Dreamcast games to woo developers, journalists and retailers at the show.

"We have full retail support," Stolar said. "We will be launching in between 15,000 and 20,000 stores with Toys R Us, Best Buy, Wal-Mart, Kmart, Kay Bee and Babbages. The presell orders ultimately will be somewhere between 250,000 and 300,000, in comparison to when PlayStation launched in 1995 (with) only 100,000 units."

Despite Stolar's optimism, Sega still faces many hurdles. Sony and Nintendo, for all intents and purposes, currently own the marketplace, estimated to be worth more than $6 billion a year.

Stolar thinks there's enough capital to go around and hopes to target early adopters, the technology consumers who want to own the latest and most advanced products and are willing to pay a little more for them.

Still, Sony accounts for about 60 percent of the U.S. market for game consoles; Nintendo accounts for more than 30 percent. Sega stands at less than 5 percent, according to Sean McGowan, an analyst at Gerard Klauer Mattison in New York.

Sony will launch its newest technology upgrade, the PlayStation II, in Japan next winter and in the United States by the fall of 2000. PlayStation II will be backward-compatible, meaning that buyers will be able to play any of the thousands of PlayStation games already on the market, an advantage that could be crucial.

On the plus side, Dreamcast has already sold more than 1 million units in Japan since its launch there last November.

"It will be a robust year for all three of us and an exciting time," Stolar said. "I believe we will sell well over 1.5 million units within our first fiscal year. Within the next fiscal year, we will sell over 3.5 million units. I think it is going to be an exciting time for Sega." &lt;

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